September 2025 Beige Book Interview – Little Rock

Matuschka Lindo Briggs: Schools are back in session for most of the Eighth District. The temperatures are coming down. The dog days of summer are coming to an end. It’s kind of bittersweet, but I do love fall and football, so I’m not complaining.

Thanks, everyone, for joining us.

Good to be back across from you, Chuck. I was thinking, when it comes to the Beige Book, you like to describe things as “mixed,” but that lacks the description and the emotion. I’m talking about the seasons and fall and …

Charles Gascon: Yeah, bittersweet. There’s more colorful language in there. I know what you’re talking about. That colorful language—we do get it from our contacts, and I’ll try to share a little bit. But when I see “terrible” and “amazing” together, I add them up and I get “mixed.” So, that’s just what I’m going to go with.

Lindo Briggs: Okay. That’s fair. Let’s dive into the national summary, and we will all listen for some dynamic and nuanced comments from around the nation.

Gascon: I’m going to start a little bit boring, but then we’ll try to make this more interesting.

Across the 12 Federal Reserve districts, really, little to no change in economic activity. Four districts reported modest growth. So, kind of running along the same, maybe a little bit better than, as the last report.

Contacts reported that consumer spending was flat or declining, because for many households, wages were failing to keep up with rising prices. For example, the New York Fed reported that consumers are being squeezed by rising costs of insurance, utilities and other expenses. Those necessities are getting in the way of being able to spend money on things that are a lot more fun.

Manufacturing firms reported shifting to local supply chains where feasible and often using automation as a way to cut costs.

More broadly speaking, the push to deploy AI partially explains the surge in data center construction across the nation. That’s a rare strength in the commercial real estate sector.

The overall sentiment was mixed across districts. Most firms reported little to no change in optimism, and they expressed differing expectations about the direction of change among their contacts. So, it’s really a mixed bag and an uncertain outlook.

Lindo Briggs: Well, it sounds like the national picture is similar to trends in our region. It seems overall activity is flat. The outlook remains pessimistic, but it doesn’t seem to be worse than it was last time we spoke, Chuck.

What are the national trends in the labor market? In this region, it seems like little hiring is taking place. A staffing contact mentioned that many of their clients remain on hold with hiring until they have more clarity of the outlook, basically.

Gascon: Most districts reported little to no change in employment, although we did see some signs of weakening. The Boston district, Minneapolis and San Francisco all reported that employment was down slightly. And like you mentioned, uncertainty in the outlook, as well as weaker demand, is leading firms to just be hesitant with hiring.

Some districts reported an uptick in layoffs, although reducing workforce through attrition still seems to be the most common way that that’s happening.

Lindo Briggs: I agree. Absolutely.

Gascon: When you look at the unemployment insurance claims data through August, they remain low. So, that’s a positive when we’re going to some of the hard data. We’re hearing more reports of companies looking into automation and AI tools as a way to reduce their demand for labor. So, it goes beyond manufacturing into some other sectors.

Are you hearing the same thing around the District?

Lindo Briggs: Yeah, similar in Arkansas for sure. A manufacturing contact says AI is changing the nature of work, allowing some tasks previously done by data scientists, paralegals and junior lawyers to all be automated. Also, throughout our District, I had contacts in a few sectors note abnormally high turnover and labor shortages, which they contribute to the loss of immigrant labor. And I’ve been hearing reports of stronger wage growth for many of our contacts.

Are other districts sharing similar themes?

Gascon: Yeah, about half the districts noted that they’re seeing a reduction in the availability of immigrant labor, which seems to be primarily impacting the construction industry. And in the summer, obviously, it’s a big time for construction activity.

AI seems to be impacting the labor market in various ways. Some contacts noted that it’s being used for resume screening, but AI interviewing tools can be a barrier to employment for some new job seekers. But at the same time, job seekers are using these technologies to refine their resumes to make them more effective, using them for mock interviews and improving the job search experience overall. So, it’s a bit of a mixed bag there.

On wage growth, it does still seem to be moderate, but as I mentioned earlier, households seem to be pinched by the rising cost of necessities, and that’s putting upward pressure on the demands for higher wages.

Lindo Briggs: Okay. This seems like a perfect place to pivot to inflation. In our District, it appears that prices are increasing at a faster pace than previous months. That’s not the direction we want to see. What is going on?

Gascon: You’re right. Inflation has been elevated for the past few years, and it seems to have been cooling. The hard data like the CPI that go through July are holding steady. So, that’s good news. But contacts are telling us that they’re experiencing cost pressures, that most firms are expecting prices to increase in the months ahead. Our contacts attribute the price increases to tariffs, but also market opportunities to improve profit margins. And some customers are expecting those price increases. That being said, there is still hesitancy to raise prices because of fear of losing business.

So, businesses are testing the water to see what households will accept with respect to changes in the prices that they’re charging.

Lindo Briggs: Yeah. That’s in line with what I’m hearing. A restaurant owner in Arkansas was absorbing higher input costs where possible, but raising some prices with sensitivity to their customer value proposition.

Overall, contacts say input prices have stabilized, but they do remain high. Companies are trying to manage costs through stringent budgeting and sourcing strategies that they know are getting tight for many consumers.

Gascon: Yeah, this price sensitivity issue, in the face of rising costs, it really comes through in the reports on consumer spending. Some retailers reported stronger-than-expected sales, but others reported outright declines.

For example, one St. Louis auto dealer reported that they had good sales as customers were buying ahead of expected price increases. However, another dealer noted that new-vehicle prices were just unaffordable to many buyers, and they didn’t have an inventory of used cars to sell.

Lindo Briggs: So, continuing with some consumer spending anecdotes: One retailer noted that consumer spending is unpredictable, and they were surprised how they could go from being very busy to having few customers from one day to the next. It’s just not the steady stream of business that they’re used to, Chuck.

Gascon: There are a lot of businesses that are using promotions to drive traffic, and that can lead to big swings in activity. It may not be one firm that’s having their promotions, but their competitor may be using promotions, and that could pull people away for one day or the next.

Nationally, the reports from the retail and hospitality sectors emphasize that businesses are offering deals and promotions to help these price-sensitive customers stretch their dollars, and that’s supporting steady demand on a month-to-month basis, particularly for domestic tourism and travel over the summer months. But it wasn’t really enough to offset the fall in demand from international visitors in many parts of the country.

Lindo Briggs: Okay, we need to wrap up here, but before we go, I’d like to talk about the ag sector. We’re getting ready for harvest season, and conditions remain strained but stable. Farming is a very difficult business even in good times—we know that. But right now, row crop prices are below breakeven production costs. A large farm equipment dealer in the District reported that defaults on payments for equipment were increasing.

This doesn’t seem like good news. Are there any bright spots with ag?

Gascon: Cattle farming remains profitable, and herds are not expected to expand, so that’ll continue to help cattle farmers. And those that are looking to leave the industry because, as you mentioned, things are very strained, their land values are expected to remain stable at this point. So, if there are exits, those land values are holding up.

Looking at nationally, it’s very similar to what you describe: Low prices on row crops, cost pressures, and then labor shortages was another ongoing theme. The weather conditions have been favorable, so that is a bright spot because it will lead to strong yields. But even at these low prices, it’s probably not going to be enough to cover costs. So, very, very difficult in the ag sector right now.

Lindo Briggs: Chuck, thanks for your time. This provides important insight for what we are hearing nationally and within our District.

For a full summary of what is happening in the Eighth Federal Reserve District, visit the St. Louis Fed’s website at stlouisfed.org.

The next Beige Book release will be October 15, followed by our podcast October 16. Thanks for listening.